James v. TACO John's Int'l, Inc.

• Citation: 425 P.3d 572
• Decision Date: 22 August 2018
• Docket Number: S-17-0339
• Parties: Dan B. JAMES and Shawn L. Eby, Appellants (Plaintiffs), v. TACO JOHN’S INTERNATIONAL, INC., Appellee (Defendant).
• Court: United States State Supreme Court of Wyoming

425 P.3d 572

Dan B. JAMES and Shawn L. Eby, Appellants (Plaintiffs),

v.TACO JOHN’S INTERNATIONAL, INC., Appellee (Defendant).

S-17-0339

Supreme Court of Wyoming.

August 22, 2018

Representing Appellant: C.M. Aron of Aron & Henning, LLP, Laramie, Wyoming. Argument by Mr. Aron.

Representing Appellee: Harold R. Bruno III and Elizabeth S. Michaels of Robinson Waters & O’Dorisio, P.C., Denver, Colorado. Samantha Caselli, Associate General Counsel for Taco John’s International, Inc., Cheyenne, Wyoming. Argument by Mr. Bruno.

Before DAVIS, C.J., and BURKE^* , FOX, KAUTZ, and BOOMGAARDEN, JJ.

BOOMGAARDEN, Justice.

[¶1] Dan B. James and Shawn L. Eby appeal from the district court’s order granting summary judgment, which found Taco John’s International, Inc. (TJI) properly terminated the two corporate executives for violating their employment agreements. We affirm.

ISSUES

[¶2] We condense, rephrase, and reorganize the issues on appeal as follows:¹

I. Is TJI entitled to summary judgment because the employment agreements unambiguously prohibited Mr. James and Mr. Eby from forming a new company and seeking other franchise opportunities while employed by TJI?

a. Are the employment agreements ambiguous, thus requiring consideration of parol evidence to determine the parties’ intent?

b. Do genuine issues of material fact preclude summary judgment?

II. Did TJI’s President and Chief Executive Officer (CEO) have apparent authority to allow Mr. James’ and Mr. Eby’s participation in a business venture unrelated to TJI and contrary to the terms of their employment agreements?

FACTS

[¶3] Mr. James and Mr. Eby were franchise executives with decades of experience in the fast food industry. In May 2013, TJI hired Mr. James as its Chief Development Officer, and Mr. Eby as its Vice President of Operations, at the behest of Jeff Linville, TJI’s recently hired President and CEO (collectively referred to as the Linville Team). At the time they were hired, Mr. James and Mr. Eby executed nearly identical employment agreements requiring both to "devote all of [their] time, attention, knowledge and skills solely to the business and interest of Employer." Employment Agreements, Section V. The employment agreements permit termination for cause without advance notice "[i]n the event of any violation by Employee of any of the terms of this Agreement. ..."² Employment Agreements, Section XII (B).

[¶4] In mid-2016, Mr. Linville informed TJI’s compensation committee of his wife’s desire to become a Beef Jerky Outlet (BJO) franchisee as her "hobby" and that he, Mr. James, and Mr. Eby would be investors in her business. The compensation committee informed TJI’s general counsel of the Linville Team’s plan to invest in the BJO franchise. Around this time, TJI’s Chief Financial Officer (CFO) became concerned about a trip the Linville Team took to Tennessee. TJI’s general counsel and CFO investigated the matters and discovered the Linville Team’s participation in the BJO venture included more than investing capital as represented by Mr. Linville. They discovered the following information.

[¶5] Mr. James and Mr. Eby participated in a conference call to learn about the BJO franchise and viewed a BJO webinar from TJI’s corporate offices in Cheyenne, Wyoming in the spring of 2016. On April 25, 2016, Mr. Linville created and registered a Colorado entity, Last Bite Jerky, LLC, for their BJO venture and listed the Linville Team as its sole members. In May of 2016, the Linville Team drafted a business plan to present to BJO and to aid in obtaining financing. The business plan stated Mr. Linville, Mr. James, and Mr. Eby were the company’s sole "partners" and provided the following "ownership responsibilities":

Each member of our management team will share in all decisions, however, we will use our expertise in the following manner.

Shawn Eby will have the responsibilities of all operational decisions, including hiring, training, inside sales building, cleanliness, and inventory management. Dan James will be responsible for all real estate decisions, market viability and lease negotiations. He will also oversee the buildout process. Jeff Linville will handle some administrative costs and marketing of the business. Also, Sharon Linville is a C.P.A. and will handle the administrative side (taxes, accounting, payroll, etc.).

The business plan also stated the company’s goal of owning two franchises by the end of 2016 and progressively acquiring more for a total of fifteen by the end of 2021. Mr. Linville saved the business plan on TJI’s internal network. The Linville Team also executed a comprehensive operating agreement for Last Bite Jerky, LLC, stating Mr. James, Mr. Eby, and Mr. Linville would manage the business as members. Mr. Linville provided the operating agreement to BJO. On June 13, 2016, Mr. James sought financing to fund the new business venture, and, in July 2016, loan applications were circulated using the Linville Team’s TJI email accounts. The Linville Team also visited BJO headquarters and met with BJO executives while on a trip to Tennessee for TJI business purposes. They also scouted for potential BJO locations in Colorado and Wyoming. TJI’s general counsel and CFO reported these findings to TJI’s board of directors. The board terminated Mr. James’ and Mr. Eby’s employment for cause on August 12, 2016, effective immediately.

[¶6] Mr. James and Mr. Eby filed a lawsuit against TJI asserting breach of the employment agreements and seeking damages in excess of $1,000,000 each.³ TJI moved for summary judgment. On October 30, 2017, the district court granted the motion, finding the employment agreements unambiguously precluded Mr. James and Mr. Eby from forming a new company and seeking other franchise opportunities while still employed as senior executives at TJI. The district court determined the undisputed facts detailing Mr. James’ and Mr. Eby’s involvement in forming a new company and pursuing other franchise opportunities were sufficient to support their termination even though they never invested any money in Last Bite Jerky, LLC, and the BJO venture never materialized. Mr. James and Mr. Eby timely filed a notice of appeal on November 29, 2017.⁴

STANDARD OF REVIEW

[¶7] We review an order granting summary judgment de novo, giving no deference to the district court’s determinations. Lindsey v. Harriet , 2011 WY 80, ¶ 18, 255 P.3d 873, 880 (Wyo. 2011) (citations omitted). Summary judgment is appropriate when there are no genuine issues as to any material fact and the moving party is entitled to judgment as a matter of law. Id. (citing W.R.C.P. 56(c) ;⁵ Snyder v. Lovercheck, 992 P.2d 1079, 1083 (Wyo. 1999) ). "We review a summary judgment in the same light as the district court, using the same materials and following the same standards." Leeks Canyon Ranch, LLC v. Callahan River Ranch, LLC , 2014 WY 62, ¶ 12, 327 P.3d 732, 737 (Wyo. 2014) (citations omitted). We examine "the record from the viewpoint most favorable to the party opposing the motion, giving to him all favorable inferences to be drawn" therefrom. Fayard v. Design Comm. of Homestead Subdivision , 2010 WY 51, ¶ 9, 230 P.3d 299, 302 (Wyo. 2010) (citations omitted).

[¶8] "The party requesting summary judgment bears the initial burden of establishing a prima facie case that no genuine issue of material fact exists, and that summary judgment should be granted as a matter of law."

Bogdanski v. Budzik , 2018 WY 7, ¶ 18, 408 P.3d 1156, 1160 (Wyo. 2018) (citations omitted). After making a prima facie showing, the burden shifts to the opposing party to provide "competent evidence admissible at trial showing there are genuine issues of material fact." Jones v. Schabron , 2005 WY 65, ¶ 10, 113 P.3d 34, 37 (Wyo. 2005) (citations omitted); see also Bogdanski , ¶ 18, 408 P.3d at 1160 (citations omitted). "The party opposing the motion must present specific facts; relying on conclusory statements or mere opinion will not satisfy that burden, nor will relying solely upon allegations and pleadings." Bogdanski , ¶ 18, 408 P.3d at 1161 (citations omitted). "A material fact is one which, if proved, would have the effect of establishing or refuting an essential element of the cause of action or defense asserted by the parties." Claman v. Popp , 2012 WY 92, ¶ 21, 279 P.3d 1003, 1011 (Wyo. 2012) (citation omitted).

[¶9] Specific to summary judgment based on contract interpretation,

[t]he initial question of whether the contract is capable of being understood in only one way is a question of law for the court. If the court determines that the contract is capable of being understood in only one way, then the language used in the contract expresses and controls the intent of the parties. In such case, the next question, what is that understanding or meaning, is also a question of law. When we review the district court’s summary judgment decisions that a contract is capable of being understood in only one way and what that understanding is, we accord no deference to those decisions.

Leeks Canyon Ranch, LLC , ¶ 12, 327 P.3d at 737 (citation omitted). "If the language is not clear or there are other material issues of fact, summary judgment is not appropriate." Fayard , ¶ 10, 230 P.3d at 302.

DISCUSSION

I. Is TJI entitled to summary judgment because the employment agreements unambiguously prohibited Mr. James and Mr. Eby from forming a new company and seeking other franchise opportunities while employed by TJI?

[¶10] Mr. James and Mr. Eby contend the parties did not intend the employment agreements to restrict Mr. James’ and Mr. Eby’s activities solely to TJI’s business and interests, as the district court determined. They assert the employment agreements are ambiguous and require parol evidence, which the district court refused to consider, to determine the parties’ intent. Mr. James and Mr. Eby argue the district court misinterpreted the agreements and reached erroneous conclusions by improperly relying on the "bare words" of Section V,...